Bob’s Financial Solutions: TPG Capital, other PEs see 26% in BoB’s credit card arm | Rare Techy

Private equity groups, including TPG Capital, Warburg Pincus, Westbridge Capital and domestic fund Gaja Capital, are in early stages of talks to acquire a 26 percent stake in BoB Financial Solutions, the credit card arm of Bank of Baroda (BoB). hit told ET of the development. The proposed deal would value BoB Financial Solutions at Rs 4,000 crore ($500 million), the sources said. ICICI Securities is advising BoB on the stake sale.

Emails sent to Bank of Baroda, Warburg Pincus, Westbridge and Gaja Capital did not receive any response till the publication of this report. A TPG spokesman declined to comment.

BoB Cards had 1.57 million credit cards at the end of October, trailing big peers such as HDFC Bank (16.54 million), ICICI (13.53 million) and SBI Card (15.16 million), central bank data showed. make a.

In June, ET had reported CEO Shailendra Singh that parent Bank of Baroda (BoB) is looking for a strategic investor in the cards business as it looks to capitalize on India’s credit culture and increase penetration in smaller cities. .

In FY22, BoB Financial had made a loss of Rs 10 crore, which was lower than the Rs 43.1-billion loss reported in March 2020. Singh said the company expects to make a profit in the current financial year.

Bad NPAs come down to 7.1% of loans, the lowest in four years.

The latest financial figures for the end of September are not available. BoB was the first company to receive a license to start a private credit card company in 1994. However, BoB faced tough competition from private sector banks and State Bank of India- (SBI)-owned SBI Card.

A person familiar with the company’s plans said the bank expects to sell up to 26% of the equity for its growth needs. “Several private equity funds are in talks, but there is no intention to sell more than 26%. The money will be used to grow the company,” this person said.

Speaking to ET in June, Singh said that getting a strategic investor would help BoB unlock some value in its company and also bring in some resources or technology expertise.

Singh said the bank will monitor sales through its branches, more than 8,500 across the country, as well as open channels abroad.

The credit card industry in India has witnessed a compound annual growth rate (CAGR) of 20% over the past five years, said a recent PwC report. The number of credit cards exceeded 78 million in July 2022. Credit card spending in October, the biggest festival month in the country, crossed the Rs 1.3-trillion mark.

With the emergence of e-commerce, the adoption of contactless payments and changes in the value proposition, the post-pandemic credit card space has undergone significant change and is constantly evolving, she added.

In 2017, the Carlyle Group had acquired a 26% stake in SBI Card from the GE group for Rs 2,000 crore and subsequently increased its holding to 74%. Carlyle has been on a roll since SBI Card was listed in 2010.